Overkill on .avi files for sequence settings?

I've gotten decent now with the move to HD from DV, but my family still has a Canon S5 IS that shoots SD 640 x 480 .AVI files that I need to deal with.
I did a very quick test (that took a while to render and then encode), but since I wanted it in 16X9 format and I'm comfortable with AIC and Apple ProRes 422, I set up a new project as:
Sequence Preset: AIC 720p
Capture Preset: HDV- Apple ProRes 422 (although I just imported the .avi file into the browser).
Rendering took a few minutes, but it came out fine.
I then exported it as a self-contained QT Movie and took it into Compressor where I exported it as a 640 x 360 for the web. The 2:21 movie test took about 23 minutes to encode.
Is this overkill for .AVI files?
Is there a better way to create the sequence settings?
Should I first use Compressor or MPEG Streamclip to convert it to AIC or ProRes 422 LT and then take it into FCP 7 or just import as I did and drag to the timeline and then expect a long first render?
Thanks,
Dave

I ran a few more tests last night trying to get the Sequence Size Settings for the down a bit to speed up rendering and for exporting from Compressor.
I set the Sequence Settings (for a new sequence) to be Apple ProRes 422 and custom-sized it at 848 x 477 to keep the 16x9 ratio for my flash video player for the 640 x 480 .avi files. (It chops off 3 pixels, but it seems fine.) I'm ultimately going to export from Compressor at 640x360 anyway.
But, I went back to the original sequence timeline which was ProRes 422 at 1920x1080 and experimented:
When I imported the raw .AVI file (no pre-transcoding) into the Browser window and then set In and Out points in the Viewer and dragged it to the timeline, the avi snippet which was 640x480 now expands to fit into the 1920x1080 timeline and views fine in the Canvas window. I then grabbed an HD 1920x1080 clip (shot from my Canon Vixia SF100 Camera--.mts file already converted to Apple ProRes 422) and set In and Out points and dragged it to the timeline. Both files seemed to play together nicely.
I bring this up because a few months ago when I was editing some of the HD footage from the Vixia, I tried to drag in a 640x480 clip and it looked like a postage stamp when viewed in the canvas. I'm not sure what is different from a few months ago and now where the 2 size clips seem to conform better.
I have a mixture of instructional video and family stuff I will be doing. Both will ultimately (after web) go to DVD and possibly Blu-ray.
*My new question:*
Should I keep using the Apple ProRes 422 timeline (or 422 LT) so I can integrate the SD and HD footage and again, ultimately be able to put both on Blu-ray?
As has been said in this forum many times, "hard drives are cheap", and even though this workflow creates storage issues, this should give me better archival quality for the SD stuff and future ease in exporting to Blu-ray along with the HD footage.
Is there a better way to go about this? Is the ProRes 422 overkill? It all looks very good on my MBP in fullscreen.
Thanks,
Dave

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